Yes. Once you turn 65, you can use your HSA funds for any purpose—not just medical expenses—without paying the 20% penalty.
However, if you use the money for non-medical expenses, the withdrawal will still be subject to regular income tax, just like withdrawals from a traditional IRA.
âś… After Age 65:
-
Medical expenses: Withdrawals remain tax-free
-
Non-medical expenses: You pay ordinary income tax, but no penalty
Example: Use HSA funds for a vacation at age 67? You’ll pay tax, but not the 20% penalty.
🧠Key Tip:
Many people use their HSA as a retirement savings vehicle, saving receipts now and letting the account grow for future flexibility—tax-free for healthcare, taxable for anything else.